Abstract: Building a new development pattern of “dual circulation” to cope with the severe domestic and international situation is of strategic significance for building a higher-level economic system. However, the dual circulation without technical support is undoubtedly low-level. Multinational enterprises span the internal and external circulations, and their OFDI guides the development of China’s technological innovation and provides technical support for the construction of the dual-circulation system. Under the internal circulation system, OFDI mainly promotes China’s technological innovation through reverse technology spillover effect, while technology absorption capacity positively regulates the promotion of reverse technology spillover effect. The external circulation plays a supporting role in the transmission of the reverse technology spillover effect; the influence of the political governance and economic freedom of the host country on the reverse technology spillover effect varies. OFDI plays a connecting role in dual circulation as its strategic layout determines the development of reverse technology spillover effects and relates to the construction of China’s technological innovation system. The closer the economic systems of the two countries are, the less obstacles China has. A close degree of economic freedom enables transnational enterprises to adapt to the business environment of the host country in a short time and reduce sunk costs. However, the distance between political systems runs opposite, which fully shows that China’s socialist system bear its own characteristics, and also reflects China’s investment preference to the developed countries. To promote OFDI for obtaining reverse technology spillover effect and accelerating technological innovation, China can take the following measures: to improve China’s technology absorption capacity under the internal circulation; to attach importance to the institutional environment of the host country under the external circulation; to rationally distribute the location selection of OFDI under the dual circulation.

Key words: dual circulation, OFDI, reverse technology spillover effect, technological innovation, influence path